Speaker of the House John Boehner, R-Ohio, leaves after a three hour photo session with members of the new 113th Congress that convened Jan. 3, 2013, in Washington. ASSOCIATED PRESS PHOTO

Two weeks after suffering their fiscal cliff "defeat," the Republicans are positioned to turn that loss into a strategic win.

Faced with the alternative of getting blamed for a $2.3 trillion tax increase by letting all of the Bush-era tax cuts expire, Republicans gave President Obama and Democrats their No. 1 priority – raising the top personal income tax rate to 39.6 percent – though on individuals with incomes above $400,000 and family incomes above $450,000 instead of at thresholds of $200,000 and $250,000. In addition, the hidden tax of phasing out both personal exemption and deductions was reinstated for individuals and families with incomes above $250,000 and $300,000, respectively.

The president also won an increase in the capital-gains tax rate to 20 percent from 15 percent, and secured an increase in the estate tax rate to 40 percent from 35 percent. Moreover, the fiscal cliff deal included $42 billion in Democratic spending increases with not one dollar of Republican spending cuts.

Debacle is the word that comes to mind.

But, as it turns out, these losses were the cost of a brilliant and well-executed tactical retreat.

First, the 10-year tax increase was limited to $600 billion. That is $200 billion less than House Speaker John Boehner's initial offer, and $1 trillion less than the president demanded.

Second, the deal gives the Republicans their strongest position since losing the House and Senate in 2006 to fight Democratic plans for bigger government and additional tax increases.

• The Democrats voted to make the Bush tax rates permanent for 99 percent of Americans, giving up their favorite straw man of blaming the Bush tax cuts for all that troubles the economy and the fiscal imbalance of the federal government.

• The Republicans achieved a permanent fix to the Alternative Minimum Tax. That removes $864 billion in fictitious revenue from the baseline budget, which means they can no longer be captured as part of a future, "revenue neutral" agreement to reform the personal income tax code.

• The tax rate on dividend income was set at 20 percent. Without the deal, dividends would have been taxed as ordinary income. Strategically, this confirms a new, bipartisan agreement to tax dividend income and capital gains at the same rate.

• The greatest threat to the integrity of the Social Security system was removed by allowing the temporary, 2-percentage-point reduction in the Social Security payroll tax to lapse.

If Republicans now choose to fight for economic growth as the key to both the revenue and spending side of the budget, they will have secured a strategic win of the first order. They could begin by pointing out at every opportunity that, according to the Congressional Budget Office, every 0.1 percentage point loss in growth increases the 10-year deficit by $314 billion. If the Obama tax increases slow the economy by just 0.2 percentage points, they will have absolutely no affect on the deficit.

By contrast, achieving an average growth rate of 4 percent a year for 10 years would reduce the deficit by $4 trillion and be far better than anything the Democrats are offering to fight poverty and elevate the middle class.

Economic growth, not the president's call for balanced austerity, is the path to fiscal balance, smaller government and increased liberty and prosperity for the American people.

Charles Kadlec is founder and CEO of Community of Liberty, Chapter One, a nonprofit in Orange County.

WRITE A LETTER TO THE EDITOR
Letters to the Editor: E-mail to letters@ocregister.com.
Please provide your name, city and telephone number (telephone numbers will not be published).
Letters of about 200 words or videos of 30-seconds
each will be given preference. Letters will be edited for length, grammar and clarity.

User Agreement

Keep it civil and stay on topic. No profanity, vulgarity, racial
slurs or personal attacks. People who harass others or joke about
tragedies will be blocked. By posting your comment, you agree to
allow Orange County Register Communications, Inc. the right to
republish your name and comment in additional Register publications
without any notification or payment.